Monday 15 March 2021
Single-source Defence Contracts
I am today announcing that I have set the baseline profit rate for single-source defence contracts at 8.31%, in line with the rate recommended by the Single Source Regulations Office (SSRO). The baseline profit rate is calculated on a three-year rolling average of underlying profit rates. The underlying profit rate decreased from 8.23% for 2020-21 to 8.19% for 2021-22.1 have accepted the methodology used by the SSRO to calculate these figures.
In addition to the main rate, I am announcing an additional baseline profit rate of 0.057%. This will only apply to qualifying defence contracts where:
i. the contract is between Secretary of State and a company incorporated under the Companies Act that is wholly owned by the UK Government; and
ii. both parties to the contract agree that it should apply.
The intention is that this rate can be used to set contract profit rates at a rate that does not result in such companies making a profit, should it not be appropriate for them to do so. Application of the five further steps set out in section 17 of the Defence Reform Act 2014 may result in a rate that is slightly different from zero on individual contracts.
Setting this additional rate diverges from the SSRO’s recommendation. The SSRO has welcomed the intention to bring contracts into the regime where it is appropriate that the contractor does not make a profit. This will enable the pricing and transparency provisions of the regulatory framework to be applied to both the contract and relevant subcontracts, which provisions are intended to assist the Government to obtain value for money and contractors to be paid fair and reasonable prices.
I am also announcing new capital servicing rates and an SSRO funding adjustment as recommended by the SSRO, which can be found at Table 1 below. These rates have been published in the London Gazette, as required by the Defence Reform Act 2014.
All of these new rates will come into effect from 1 April 2021.
Element 2020 Rates 2021 Rates Baseline Profit Rate (BPR) (% on contract cost) 8.22% 8.31% Baseline Profit Rate to apply to contracts between the Secretary of State and a company wholly owned by the UK Government and where both parties agree (% on contract cost) N/A 0.057% Fixed Capital Servicing Rate (% on Fixed Capital employed) 3.66% 3.27% Working Capital Servicing Rate (% on positive Working Capital employed) 1.22% 1.33% Working Capital Servicing Rate (% on negative Working Capital employed) 0.61% 0.65% SSRO Funding Adjustment 0.052% 0.057%
Baseline Profit Rate (BPR) (% on contract cost)
Baseline Profit Rate to apply to contracts between the Secretary of State and a company wholly owned by the UK Government and where both parties agree (% on contract cost)
Fixed Capital Servicing Rate (% on Fixed Capital employed)
Working Capital Servicing Rate (% on positive Working Capital employed)
Working Capital Servicing Rate (% on negative Working Capital employed)
SSRO Funding Adjustment
Independent Chief Inspector of Borders and Immigration
I am pleased to announce Mr David Neal’s appointment as the Independent Chief Inspector of Borders and Immigration. The appointment has been made in accordance with the UK Borders Act 2007 and in line with the Governance Code on Public Appointments, following a fair and open competition. The appointment will be for a fixed term of three years. Mr Neal will take up post on 22 March 2021.
David Neal was appointed by HM The Queen as the Provost Marshal (Army) and commanded the 1st Military Police Brigade from 2016 until 2019. He led the Royal Military Police through major reforms including the Service Justice System Review, and was responsible for Operation Northmoor, the Royal Military Police investigation into allegations of illegal killings by British troops in Afghanistan.
Future Trading Relationship with Australia
The fourth round of Free Trade Agreement (FTA) negotiations with Australia took place between Monday 22 February and Friday 5 March. During the two weeks, negotiators held 51 negotiation sessions, covering 27 different chapter areas. In total, we have had 170 sessions since launching negotiations in July 2020.
Both the negotiation teams shared text and additional proposals before the round, including on digital, labour and technical barriers to trade, allowing negotiators to enhance their substantive conversations. From this, negotiators were able to build mutual understanding, and make further progress consolidating texts in most chapter areas. Focused engagement has enabled negotiators to provisionally identify shared ambition and remaining points of divergence to work through ahead of the next round.
Good progress has been made in areas including customs, rules of origin, and professional services. The majority of text has been agreed in chapters on good regulatory practice, as well as small to medium-sized enterprises. Development in the latter reflects the commitment of both Australia and the UK to ensuring businesses of all sizes can benefit from the FTA.
Some text was agreed in cross-border trade in services. Negotiators were also able to hold technical discussions on mobility, international maritime transport services, express delivery services and domestic regulation.
Meanwhile, progress was also made on procurement and digital, with parts of the text agreed. In addition, there were productive discussions on the innovation chapter.
Discussions were taken forward on investment, where we hope to include provisions which further enhance our strong bilateral relationship, building on the UK’s position as the second largest direct investor in Australia and the second largest recipient of Australian foreign direct investment in 2019.
The Australia and UK negotiation teams have also planned an intensive period of intersessional discussions in the coming weeks to continue this momentum ahead of a fifth round of talks.
Below is a summary list of the areas discussed in the round, which continued to take place by video conference:
Customs and trade facilitation
Environment and clean growth
Good regulatory practice
Legal and institutional provisions
Rules of origin
Sanitary and phytosanitary measures
Services, including movement of natural persons, professional services, international maritime transport services and delivery services.
Small and medium-sized enterprises
State-to-state dispute settlement
Technical barriers to trade
Trade and women’s economic empowerment
Trade in goods
Any deal the UK Government agree will be fair and balanced and in the best interests of the whole of the UK. As we will in all negotiations, we remain committed to upholding our high environmental, labour, product and food safety, and animal welfare standards in our trade agreement with Australia, as well as protecting the national health service (NHS).
National Bus Strategy: England (Outside London)
Today the Government have published “Bus Back Better”, the long-term national bus strategy for England outside London.
Our strategy will deliver better bus services for passengers across England, through ambitious and far-reaching reform of how services are planned and delivered. The Prime Minister’s announcement of transformational funding—a combined £5 billion for buses, cycling and walking—in February last year demonstrated the Government’s commitment to buses and active travel. Following publication in June 2020 of “Gear Change: A bold vision for cycling and walking”, today’s publication explains how buses will be transformed.
Buses are our most used form of public transport but, even before covid-19, they faced challenges. There are pockets of good bus performance outside London, but far too many places have fallen behind. Turning this around is central to this Government’s objectives of reaching net-zero and levelling up.
Covid-19 has had a significant impact on buses, as with all transport. It gives urgency to the strategy, but also an opportunity. Dealing with the emergency fostered greater co-operation between bus operators and local authorities, which we can build on. We know that wherever and whenever bus patronage grows, there are bus operators and local government working together to deliver improvements for passengers. We want this for all passengers, and the strategy sets out that we want every local transport authority and bus operator in England to be in a statutory enhanced partnership or a franchising arrangement, using existing powers in the Bus Services Act 2017. We will make £25 million available straightaway to develop these.
The developing partnerships will be asked to produce robust and ambitious bus service improvement plans by the end of October 2021. We will expect the plans to set out a road map to better services for passengers and communities, urban and rural, and be fully informed by local needs.
The strategy also sets out our ambitious road map to a zero-emission bus fleet, including a commitment that we will consult on ending the sale of new diesel buses. This will bring buses into line with other vehicles—we have already announced ending the sale of new petrol and diesel cars by 2030.
Disabled people rely on bus services more than most and the strategy confirms our continuing commitment to supporting an inclusive transport system. One of the strategy’s aims is to improve equality of opportunity, particularly for older and disabled people. We want to see improvement plans that drive improvement in accessibility for all. Disabled people should have the confidence to travel when and where they want to, and our plans ensure that bus services play their part in making that possible.
Alongside this, we have also announced today that 17 rural and suburban communities will see an additional investment of £20 million from the Government’s rural mobility fund to trial innovative on-demand services that are able to get closer to where people live and at a time convenient for them—another example of the Government’s work to level-up transport infrastructure across the country.
I am placing a copy of the national bus strategy in the Libraries of both Houses.